First-time Buyers
Moneysupermarket unveils first-time buyer research
As house prices continue to fall, research from Moneysupermarket found 13% of 18-34 year olds are considering stepping on to the property ladder for the first time in the next 12 months.
A quarter of first-time house hunters have the deposit saved already; no mean feat when you consider the average deposit for a first-time buyer is £32,000.
The number of mortgage deals available has plummeted 60% over the past 12 months, and deposits of 25% or more are required on many of the leading deals – there is very little choice if you have a deposit of less than 10%, and nothing if you have less than 5% to put down.
For those who have not yet secured their deposit, more than a quarter (29%) will take the sensible route to bide their time and rent until they have saved enough money, but 16% are considering the worrying option of taking out a loan to cover the cost.
Louise Cuming, head of mortgages at Moneysupermarket, said: “Taking out a loan to pay for a mortgage deposit is a dangerous move, and must be avoided even if it means you have to delay buying your first home. Anyone who takes a loan is effectively taking out a 100% mortgage through the back door. Not only will the mortgage lender decline the application if it discovers this is the source of the deposit but it is also a huge risk to the borrower – your monthly outgoings will be higher which means there is a greater chance of you finding yourself unable to keep up with repayments.”
Some potential first-time buyers are playing a waiting game with 14% hanging their hopes on property prices dropping further and 6% banking on the fact that we’ll see 100% mortgage deals return to the market.
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Cuming added: “It’s easy to see why only 13% of under 34-year olds are planning to get on to the housing ladder at the moment. The need for such a high deposit is pricing many people out of the market. The obsession with equity that has gripped mortgage lenders over the last couple of years has hit first-time buyers hardest. Lenders need to concentrate more on assessing the affordability of the mortgage on a case by case basis and less on the size of the deposit if they are serious about improving the mortgage market.”